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Globalization Domination of Finance

The accumulation of capital has certain fundamental global requirements. The first one to be outlined here is the system of world finance.

No subject is as little understood as the world’s financial system. First the pound sterling and now the US dollar have dominated our world trading system which stands both as the symbol and the actuality of hegemonic control. It is not complicated and has to be clearly understood.

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In 1844, the British created the first world central bank and the world’s first international currency system. In its essence, a sterling note was exchangeable for a given weight of gold. What matters is that the Bank of England stood surety behind everyone who traded in sterling.

What this meant was that the Bank of England needed to hold sufficient gold reserves so that in a crisis it could always have enough reserves to maintain confidence in sterling. And that meant that, overall, Britain’s trade had to balance positively: that is, it had to export more than it imported so that there was a constant flow of gold into the central bank.

The result for Britain was that it was the very centre point of world trade for one hundred years, and that London became the centre of the world’s money markets, with huge financial benefits to its ruling classes.

This entire edifice came tumbling down during the 1914-18 war. The war went on for much longer and with greater intensity than any one had imagined, and Britain’s war needs were paid for by credits to the Americans. And, although the British Exchequer tried very hard to return to the gold standard in the 1920s, Britain had been toppled from her dominant position. The war had weakened her for all time in terms of Imperial ambition. Military overreach had destroyed in such a short time what had once been an unassailable position.

Roger van Zwanenberg

Source: Essays on Muslims and the Challenges of Globalisation, Institute of Policy Studies, Islamabad. Republished with permission.